Exhibit 10.8
[LOGO] State Street
SECURITY AGREEMENT
This SECURITY AGREEMENT dated as of June 5, 1991 is made by Toymax, Inc.,
a company incorporated under the laws of the State of New York (the "Company")
in favor of State Street Bank & Trust Company, 00xx Xxxxx, Xxxxxxxxx Xxxxx,
00-00 Xxxxxx Xxxx, Xxxx Xxxx (the "Lender").
RECITALS
WHEREAS, the Lender has by a facility letter dated May 27, 1991 (as
amended from time to time, the "Facility Letter") agreed to make certain
facilities available to Concentric Toys Ltd, a company incorporated under the
laws of Hong Kong (the "Borrower");
WHEREAS, it is a condition precedent to the availability of the facilities
under the Facility Letter that the Company executes and delivers to the Lender,
among other securities, a guarantee of all obligations of the Borrower to the
Lender (the "Guarantee") and a Security Agreement in substantially the form
hereof;
Now, THEREFORE, in consideration of the foregoing premises the Company
hereby agrees as follows:
1. INTERPRETATION
SECTION 1.01: Uniform Commercial Code. Unless otherwise defined herein,
all terms defined in Article 9 of the Uniform Commercial Code (the "Code")
in effect as of the date hereof in the State of New York used herein as
therein defined.
2. GRANT OF SECURITY INTEREST
SECTION 2.01: Grant of Security The Company hereby assigns, pledges and
grants to the Lender a security interest in all of the Company's right,
title and interest in and to the following, whether now owned or hereafter
acquired (the "Collateral"):
(a) all goods, merchandise, raw materials, supplies, goods in process,
finished goods and other tangible personal property held by the
Company for processing, sale or lease or furnished or to be
furnished by the Company under contracts of service or to be used or
consumed in the Company's business (the "Inventory"); and
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(b) all rights to the payment of money, whether or not earned by
performance, including, but not limited to, any of the following
which consists of a right to the payment of money: accounts,
contract rights, chattel paper, instruments, general intangibles and
other obligations of any kind, now or hereafter existing, arising
out of or in connection with the sale or lease of the Inventory or
other goods or the rendering of services, and all rights now or
hereafter existing in and to all security agreements, leases, and
other contracts securing or otherwise relating to any such accounts,
contract rights, chattel paper, instruments, general intangibles or
obligations (any and all such accounts, contract rights, chattel
paper, instruments, general intangibles, obligations and any and all
such leases, security agreements and other contracts being the
"Receivables");
(c) all proceeds of any and all of the foregoing Collateral including,
without limitation, proceeds which constitute property of the types
described in paragraph (b) of this Section 2.01 and, to the extent
not otherwise included, all payments under insurance (whether or not
the Lender is the loss payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with
respect to any of the foregoing Collateral and all deposits held in
the name of the Company with any financial institution; and
(d) all general intangibles of the Company including without limitation
goodwill, trade secrets, trade names, trademarks and patents and
applications therefor;
SECTION 2.02: Secured Obligations. This Security Agreement secures, and
the Collateral is security for the payment in full when due, whether at
stated maturity, by acceleration or otherwise, of all present and future
indebtedness, obligations and liabilities (whether for principal,
interest, fees, expenses or otherwise) of the Borrower to the Lender
including the Borrower's obligations under or in connection with the
Facility Letter, and all present and future indebtedness, obligations and
liabilities (whether for principal, interest, fees, expenses or otherwise)
of the Company to the Lender including its obligations under or in
connection with the Guarantee or otherwise in connection with the Facility
Letter, and all obligations of the Company now or hereafter existing under
this Security Agreement (all of which being hereinafter collectively
called the "Obligations").
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3. REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants that:
SECTION 3.01 Due Incorporation and Good Standing. The Company is a
corporation duly organized, existing and in good standing under the laws
of the State of New York, and is duly qualified and in good standing in
every other state in which it is doing business, and the execution,
delivery and performance hereof have been duly authorized, are not in
contravention of law or the terms of the Company's charter or by-laws, or
in contravention of the terms of any indenture, agreement or undertaking
to which it is a party or by which it is bound, and that the execution,
delivery and performance hereof are within its corporate powers.
SECTION 3.02: Ownership and Control of Collateral.
(a) The Company owns the Collateral free and clear of any lien, security
interest, charge or encumbrance except for the security interest
granted to Congress Xxxxxxx Corporation, a company incorporated
under the laws of the State of New York (the "Factor") and the
Lender respectively under (i) a Factoring Agreement dated __________
and made between the Company and the Factor; (ii) an Assignment of
Factoring Credit Balances Agreement made or to be made between the
Factor, the Lender, the Company and the Borrower; and (iii) this
Security Agreement. No effective financing statements or other
instrument similar in effect covering all or any part of the
Collateral is on file or recorded in any filing or recording office
save for the financing statements filed in connection with the
above-mentioned Factoring Agreement and Assignment of Factoring
Credit Balances Agreement.
(b) The chief executive office of the Company is located at the address
of the Company set forth in Section 8.05. The offices where the
Company keeps its records concerning the Receivables and all
originals of all chattel paper which evidence Receivables are
located at: 00-00 Xxxxxx Xxxxxx Xxxxxxxxxx, XX 00000. The Company
hereby undertakes that it will xxxx or stamp "Assigned to State
Street Bank & Trust Company" on all originals of all chattel paper
which evidence Receivables or, if so required by the Lender, deliver
the same to the Lender or such representative as the Lender may
direct.
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(c) The places where the Company keeps and will keep the Inventory are
located at: 00 Xxxxx 0xx Xxxxxx, Xxxxxxxx, XX.
SECTION 3.03 First Priority Security Interest.
(a) This Security Agreement creates a valid security interest in the
Collateral, securing the payment of the Obligations. All filings and
other actions (including the delivery to the Lender of any
instrument pursuant to Section 5.05) necessary or desirable to
perfect such security interest and to create a first priority
security interest in the Collateral have been duly taken.
(b) No authorization, approval or other action by, and no notice to or
other filing with, any governmental authority or regulatory body is
required either (i) for the grant by the Company of the security
interest granted hereby or for the execution, delivery or
performance of this Security Agreement by the Company or (ii) for
the perfection of or the exercise by the Lender of its rights and
remedier shereunder.
SECTION 3.04: Financial Statements. The Financial statements relating to
the Company heretofore delivered and hereafter to be delivered to the
Lender are complete and correct and present fairly the financial condition
of the Company and of its subsidiaries, if any, as of the dates thereof
and for the periods included therein, all in accordance with generally
accepted accounting principles and practices consistently applied
throughout the periods involved, and since the date of the most recent
financial statements heretofore delivered to the Lender there has been no
material adverse change in such condition.
SECTION 3.05: No Pending Action. There are no actions, suits or
proceedings pending or, to the knowledge of the Company, threatened
against the Company, at law or in equity or before or by any federal,
state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality which may result in any material adverse
change to the business, properties or assets, or in the condition,
financial or otherwise, of the Company.
4. SPECIAL PROVISIONS REGARDING INVENTORY
SECTION 4.01: In the absence of a default hereunder, the Company may use,
consume and sell the Inventory in its ordinary course of business substantially
in the same manner as now conducted provided that the Company:
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(a) shall immediately notify the Lender of any sale of the Inventory to
customers who are not on the approved list of customers as
determined by the Factor pursuant to the Factoring Agreement dated
and made between the Company and the Factor referred to in Section
3.02(a) above; and
(b) will not without the written consent of the Lender sell the
Inventory to any person(s) to whom the Company is indebted resulting
in a partial or complete satisfaction of a debt/debts owing by the
Company to such person(s).
SECTION 4.02: The Company will maintain the Inventory in good order and
condition and will immediately notify the Lender of any damage thereto or
any loss or significant diminution in the value thereof.
5. COVENANTS
The Company covenants and agrees that from and after the date of this
Security Agreement and until the Obligations shall have been fully
satisfied:
SECTION 5.01: Change in Place of Business, Location of Collateral. The
Company will notify the Lender in writing not less than thirty (30) days
prior to any change in location of (i) the Company's chief executive
office or any of its other places of business or (ii) any Collateral or
(iii) the offices where the Company's books, records and computer discs or
tapes, source codes and related information concerning the Receivables are
kept or (iv) any Inventory.
SECTION 5.02: Transfer and Other Liens. Except as provided for by Section
4.01 in the case of the Inventory, the Company shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise dispose
of any of the Collateral;
(b) create or suffer to exist any lien, security interest or other
charge or encumbrance upon or with respect to any of the Collateral
to secure indebtedness of any person or entity, save for the
security interest created by this Security Agreement.
SECTION 5.03: Inspection. The Company will permit representatives of the
Lender at any time to inspect the Inventory and to inspect and make
abstracts from the Company's books and records pertaining to the
Receivables.
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SECTION 5.04: Notices. The Company will notify the Lender promptly, in
reasonable detail, (i) of any material claim made or asserted against the
Collateral by any person, (ii) of any material change in the composition
of the Collateral, (iii) of any event which materially and adversely
affects the ability of the Lender to dispose of the Collateral or the
rights and remedies of the Lender and (iv) of the occurrence of any other
event which would have a material adverse effect on a substantial portion
of the Collateral or on the security interest created hereunder.
SECTION 5.05: Reports; Collections.
(a) The Company will furnish to the Lender from time to time upon
request statements further identifying and describing the Collateral
owned by it, reports of the locations of the Collateral and such
other reports in connection with the Collateral as the Lender may
reasonably request, all in reasonable detail.
(b) If the Lender exercises its right to make collection, the Company
shall take such action as the Lender may deem necessary or advisable
to enforce collection of the Receivables.
SECTION 5.06: Insurance. The Company shall at its own cost and expense
insure the Inventory and other tangible personal property comprising the
Collateral against loss or damage by fire and other hazards and such other
risks, with such insurance companies as the Lender shall approve and in an
amount equal to at least their fair market value and the Company shall
deliver to the Lender duplicate copies of such policies or other evidence
satisfactory to the Lender of compliance with the foregoing. The Company
shall, if so required by the Lender, effect such policy or policies of
insurance in the name of the Lender with loss or damage payable to the
Lender.
In case of any breach of this covenant, the Lender may effect such
insurance on the Inventory and such other tangible personal property
comprising the Collateral, and the premiums and expenses of the insurance
shall become an additional lien on the Collateral, secured by this
Security Agreement, and payable on demand with interest. If default be
made in the payment of the premiums and expenses of such insurance, or if
insurance cannot with reasonable effort be obtained, then all sums secured
hereby, whether or not due, shall immediately become due and payable and
the Lender shall be entitled to exercise the remedies stipulated in
Article 7 hereof.
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SECTION 5.07: Further Assurance.
(a) At any time and from time to time, upon the Lender's written request
and at the expense of the Company, the Company will promptly and
duly execute and deliver any and all such further writings and take
such further action as the Lender may request in order to perfect
and protect any security interest granted or purported to be granted
hereby or to enable the Lender to exercise and enforce its rights
and remedies hereunder with respect to any Collateral.
(b) (i) The Company will execute and file such financing or
continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or
as the Lender may request, in order to perfect and preserve
the security interest granted or purported to be granted
hereby.
(ii) The Lender may file as a financing statement in respect of
this Security Agreement a copy of this Security Agreement or a
financing statement in respect thereof. Without prejudice to
the foregoing right of the Lender, the Company hereby
authorizes the Lender to file one or more financing or
continuation statements, and amendments thereto, relative to
all or any part of the Collateral without the signature of the
Company where permitted by law. The Lender shall provide to
the Company a copy of each financing statement or continuation
statement filed by it without the signature of the Company.
6. AGENT APPOINTED ATTORNEY-IN-FACT
SECTION 6.01: Appointment of the Lender as Attorney-in-Fact. The Company
hereby irrevocably constitutes and appoints the Lender as the Company's
true and lawful attorney-in-fact, with full authority in the place and
stead of the Company and in the name of the Company or otherwise, from
time to time in the Lender's discretion, for the purpose of carrying out
the terms of this Security Agreement, to take any action and to execute
any document or instrument which the Lender may deem necessary to protect
the rights and interests of the Lender in the Collateral. Without limiting
the generality of the foregoing, upon default in the payment of any
Obligation, the Company hereby give the Lender the power and right, on
behalf of the Company, without notice or assent by the Company to do the
following:
(a) to ask, demand, collect; xxx for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral;
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(b) to receive, indorse, and collect any drafts or other instruments,
documents and chattel paper in connection with clause (a) above;
(c) to file any claims or take any action or institute any proceedings
which the Lender may deem necessary or desirable for the collection
of any of the Collateral or otherwise to enforce the rights of the
Lender with respect to any of the Collateral.
SECTION 6.02: Lender May Perform. If the Company shall fail to perform or
comply with any agreement contained herein, the Lender may itself perform
or comply with, or cause performance of or compliance with, such
agreement, and the expense of the Lender incurred in connection therewith
shall be payable by the Company promptly after receipt of written demand
therefor and shall constitute Obligations secured hereby.
7. DEFAULT AND REMEDIES
SECTION 7.01: Remedies. If a default in the payment of any Obligation
shall have occurred and be continuing or upon a default in the performance
of any obligation of the Company contained herein:
(a) The Lender may exercise in respect of the Collateral, in addition to
other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party on default
under the Code (whether or not the Code applies to the affected
Collateral) and also may (i) require the Company to, and the Company
hereby agrees that it will, at its expense and upon request of the
Lender forthwith, assemble all or part of the Collateral as directed
by the Lender and make it available to the Lender at a place to be
designated by the Lender which is reasonably convenient to both
parties and (ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Lender's offices or elsewhere, for cash,
on credit or for future delivery, and upon such other terms as are
commercially reasonable. The Lender may adjourn any public or
private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made
at the time and place to which it was so adjourned.
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(b) All cash proceeds received by the Lender in respect of any sale of,
collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Lender, be held by the
Lender as collateral for, and/or then or at any time thereafter
applied as set forth in Section 702. Any surplus of such cash or
cash proceeds held by the Lender and remaining after payment in full
of all the Obligations shall be paid over to the Company or to
whomsoever may be lawfully entitled to receive such surplus.
SECTION 7.02: Application of Proceeds. The proceeds of any collection,
recovery, receipt, appropriation, realization or sale of all or any part
of the Collateral pursuant to the exercise by the Lender of its remedies
as a secured creditor under this Security Agreement shall be applied by
the Lender:
First, to the payment of the costs and expenses of such sale, collection
or other realization, including reasonable compensation to Lender's
counsel, and all expenses, liabilities and advances made or incurred by
the Lender in connection therewith;
Second, to the payment of the Obligations; and
Third, after payment in full of all Obligations, to the payment to the
Company, or its successors or assigns, or to whomsoever may be lawfully
entitled to receive the same or as a court of competent jurisdiction may
direct, of any surplus then remaining from such proceeds.
8. MISCELLANEOUS
SECTION 8.01: Costs and Expenses. The Company agrees to pay to the Lender
promptly after the receipt of written demand therefor, the amount of any
and all reasonable expenses, including the reasonable fees and
disbursements of its counsel (including the allocated costs of staff
counsel) and of any experts and agents, which the Lender may incur in
connection with the preparation, negotiation, amendment and administration
of this Security Agreement, or which the Lender may incur in respect of
(i) the custody, preservation, use or operation of, or the sale of,
collection from or other realization upon and of the Collateral, (ii) the
exercise or enforcement of any of its rights hereunder, or (iii) the
failure by the Company to perform or observe any of the provisions hereof.
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SECTION 8.02: No Waiver. No failure on the part of the Lender to exercise,
and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise by
the Lender of any right, power or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or
remedy. The remedies herein provided are cumulative and are not exclusive
of any remedies provided by law.
SECTION 8.03: Severability. Any provision of this Security Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, any
such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
SECTION 8.04: Amendments, Etc. This Security Agreement may not be amended,
modified or waived except with the written consent of the Company and the
Lender.
SECTION 8.05: Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including telex or telecopy
communication) and mailed, telexed, telecopied or delivered, if to the
Company, at its address at 00-00 Xxxxxx Xxxxxx, Xxxxxxxxxx, XX, 00000 or
if to the Lender, at its address at 00xx Xxxxx, Xxxxxxxxx Xxxxx, 00-00
Xxxxxx Xxxx, Xxxx Xxxx, Attention: The Manager, or as to either party at
such address as shall be designated by such party in written notice to the
other party complying as to delivery with the terms of this Section 8.05.
All such notices and other communications shall, when telexed, be
effective when dispatched with receipt of appropriate answerback and
shall, when mailed, delivered or telecopied, be effective when received.
SECTION 8.06: Continuing Security Interest. This Security Agreement shall
create a continuing security interest in the Collateral and shall (i)
remain in full force and effect until payment in full of all Obligations,
(ii) be binding upon the Company, its successors an assigns, and (iii)
inure to the benefit of the Lender and its successors, transferees and
assigns. Upon the payment in full of all Obligations, the security
interest created hereby shall terminate and the Company shall be entitled
to the return, promptly upon its request and at its expense, of such of
the Collateral as shall not have been sold or otherwise applied pursuant
to the terms hereof.
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SECTION 8.07: Governing law. This Security Agreement shall be governed by
and construed in accordance with the law, excluding the conflicts of laws
rules, of the State of New York, without prejudice to or limitation of any
other rights or remedies available to the Lender under the laws of any
jurisdiction where the Company or its assets may be found.
SECTION 8.08: Waiver of Immunity. To the extent that the Company has or
hereafter may acquire or have attributed to it any immunity (sovereign or
otherwise) from suit, the jurisdiction of any court or from set-off or any
legal process (whether through service of notice, attachment prior to
judgment, attachment in aid of execution of judgement, execution of
judgment, arrest of property or otherwise) with respect to itself or its
property, it hereby expressly, irrevocably and unconditionally agrees not
to plead or claim, and waives, such immunity in respect of its obligations
hereunder and without limiting the generality of the foregoing, (i) agrees
that such immunity is hereby waived to the fullest extent permitted under
the laws applicable thereto in any jurisdiction in which an action may be
brought and that the waivers set forth in this Section 8.08 are intended
to be unconditional and irrevocable for purposes of any such laws and not
subject to withdrawal and (ii) consents generally for the purposes of the
laws in any such jurisdiction to the giving of any relief or the issue of
any process.
IN WITNESS WHEREOF, the Company has caused this Security Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
By : /s/ Xxxxxx Xxxxxxxxxx
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Name : Xxxxxx Xxxxxxxxxx
Title : President
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